Unfair Trading Practices in the Food Industry: Overview and Impact

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Unfair Trading Practices (UTPs) in the food industry pose a significant threat to smaller operators like agricultural producers and SME processors. These practices not only endanger profitability but also undermine trust in the fairness of the food supply chain, affecting stakeholders at various levels. Stakeholder involvement and EU-wide opinions emphasize the importance of fairness in the food supply chain. The Directive No. 2019/633 aims to address UTPs in business-to-business relationships in the agricultural and food sector.

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Unfair Trading Practices Regulations and Overview of NFO public consultation submissions Food Industry Development Division Department of Agriculture, Food and the Marine An Roinn Talmha ochta, Bia agus Mara Department of Agriculture, Food and the Marine

What do we mean by Unfair Trading Practices (UTPs) ? UTPs can broadly be defined as practices that grossly deviate from good commercial conduct, are contrary to good faith and fair dealing and are unilaterally imposed by one trading partner on another (EC Communication 2014) Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 2 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Why the need to deal with UTPs ? - Detrimental mainly to otherwise viable smaller operators such as agricultural producers and SME processors of food products - Endanger profitability and ability to compete fairly and to affect their capacity to invest and innovate with regard to the quality of products and services offered - Undermine trust in the overall fairness of the food supply chain - Create dissimilar business conditions for operators - Impair the CAP objective of ensuring a fair standard of living for the agricultural Body Level One Body Level Two Body Level Three Body Level Four Body Level Five community - jeopardises the profitability of farmers and lead to downward pressure on their market income (European Commission Impact Assessment 2018) 3 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Importance of fairness in the food supply chain Key stakeholder involvement 2018 EU Wide Opinion Poll 88% of respondents considered that strengthening farmers' role in the food supply chain is important National legislation Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 4 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Current Status Directive No. 2019/633 on unfair trading practices in business-to- Business relationships in the agricultural and food supply chain April 2019: 1 May 2021 Deadline for Transposition into national law Ireland 2018 and 2019 Public consultations 2020 Commitment in the Programme for Government provided that a new National Food Ombudsman would enforce the Directive and deal with price reporting and analysis - primary legislation Two stage approach S.I. No. 198 of 2021 transposing - Minimum Harmonisation Approach 28 April 2021 Body Level One Body Level Two Body Level Three Body Level Four Body Level Five End of public consultation on primary legislation 11 June 2021 Primary legislation under preparation for new Office and extending UTP Legislation On-Going 5 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Key points of UTP legislation Aims to improve the protection of farmers and small, medium and mid- range sized suppliers against stronger buyers Prohibits 16 unfair trading practices Provides for an Enforcement Authority and penalties Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 6 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Agricultural and food products - All agriculture and food products included in Annex I to the EU Treaty and products not listed in that Annex but processed for use as food using products listed in that Annex Includes non food products such as live trees, plants, cut flowers supplied by for planting or for ornamental use products the milling industry e.g. malt. Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 7 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Suppliers to be protected and buyers Who is a buyer? Who is a supplier? Includes Farmer Processor Distributor, e.g. wholesaler Producer organisation, including cooperatives Nursery garden centres, florists Includes Processor Distributor, e.g. wholesaler Producer organisation, including cooperatives when they buy from their farmer members Nursery garden centres, florists A retailer or retail association Public authorities 8 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Complaints Suppliers Organisations on behalf of members - Legitimate interest 9 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Suppliers to be Protected Size of turnover (supplier vs buyer) UTPs are less likely to occur when the parties to a transaction have symmetric bargaining power (EU impact assessment) Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 10 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Prohibited UTPs 1. Payments later than 30 days for perishable agricultural and food products perishable agricultural and food products means agricultural and food products that by their nature or at their stage of processing are liable to become unfit for sale within 30 days after harvest, production or processing. 2. Payment later than 60 days for other agricultural and food products 3. Short-notice cancellations of perishable agricultural and food products 4. Unilateral contract changes by the buyer 5. Fees not related to a specific supply transaction 11 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Prohibited UTPs contd 6. Risk of loss and deterioration transferred to the supplier 7. Refusal to agree to written confirmation of a supply agreement, by the buyer if requested 8. Misuse of trade secrets by the buyer 9. Commercial retaliation by the buyer Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 10. Transferring the costs of examining customer complaints to the supplier 12 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Prohibited UTPS unless agreed beforehand 11. The buyer returns unsold products to the supplier without paying for those unsold products 12. Payment by the supplier for promotion 13. Payment by the supplier for stocking, display and listing 14. Payment by the supplier for marketing 15. Payment by the supplier for advertising 16. Payment by the supplier for staff of the buyer, fitting out premises 13 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Investigation and Enforcement of rules DAFM Power to Conduct investigations (complaint or on its own initiative) Require buyers and suppliers to provide all necessary information Carry out unannounced on-site inspections Take decisions if finds an infringement Issue a compliance notice Initiate proceedings for the imposition of fines Publish decisions following investigation 14 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Enforcement Penalties and Prosecutions A person who commits an offence is liable (a) on summary conviction, to a class A fine or to imprisonment for a term not exceeding 6 months or to both, or (b) on conviction on indictment, to a fine not exceeding 500,000 or to imprisonment for a term not exceeding 3 years or to both. Open to Alternative Dispute Resolution Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 15 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Important dates 28 April 21: Transposition date 1 July 21: All New contracts/ agreements must be compliant (incl from 28 Apr) 28 April 22: Existing Contracts/ Agreements Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 16 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Considerations when making supply agreements Does this arrangement include a practice that deviates from good commercial conduct? Is this agreement contrary to good faith and fair dealing? Is there something unilaterally imposed? Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 17 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Overview of Submissions to NFO/new Office Consultation 18 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Primary legislation for new Office The Programme for Government National Food Ombudsman (NFO) - to enforce the Unfair Trading Practices Directive. - a specific role in analysing and reporting on price and market data in Ireland. Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 19 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Public consultation What powers should the new Office have (in addition to UTP)? Should we extend/amend rules in UTP Directive? Inform principles and policies for primary legislation Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 20 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

No of submissions 27 Submissions received 20% Representative organisations 20% Farmer/primary producers 10% Producer organisation 25% Other Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 21 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Questions on Market transparency Q 2.3 Negative consequences? Yes 40% No 60% Q.2.4 Who would benefit? Suppliers Buyers Consumers Q.2.5 Open to providing additional data to improve market transparency? Yes: 70% No: 30% 35% 25% 40% Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 22 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Questions on Extending Unfair Trading Practices Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 23 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q.3.1 Changes to turnover 3.1 Should Categories of Turnover be changed? Yes: 65% No: 35% Turnover Values are too high relative to the size of companies in Ireland. Max turnover 350m should be increased Include markets that might have monopoly/oligopoly powers No minimum or maximum turnover - Office should have the powers to investigate complaints irrespective of the level of turnover Body Level One Body Level Two Body Level Three Body Level Four Body Level Five Max turnover 350m should not be increased Turnover levels should not be changed 24 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q 3.2 Change Grey to Black UTPs Q.3.2 Should Grey UTPs to Black UTPs Yes: 70% No: 30% All Grey UTPs should be Black Specific UTPs should be Black Clear Guidelines needed for Grey More time needed to assess implementation/impact to consider all aspects of contracts and unforeseen consequences Option to change following review later Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 25 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q.3.3 Additional Unfair Trading Practices Q.3.3 Is the List of UTPs sufficient? Yes: 30% No: 70% Discrimination and retaliation including delisting related activities Below cost of production selling Unilateral imposition of Quality standards Labelling/Marketing related More time needed to see how implementation operates Grocery Goods Undertakings regulations sufficient with UTPs Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 26 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q.3.4 and 3.5 Alternative Dispute Resolution and engagement with stakeholders Q.3.4 Should the Office promote ADR? Yes: 85% No: 15% Q.3.5 Should the Office: Engage with Stakeholders: Promote of best practices in agreements Educate stakeholders 90% 85% 65% Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 27 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q 3.6 Other changes? Q.3.6 Should there be other changes Yes: 70% No: 30% - Should deal with all Annex 1 and non-Annex 1 products and relevant non-food grocery products. Regulated practices covered by the existing Grocery Goods undertakings Regulations needs to be maintained Office should deal with below cost selling Have an industry wide forum before recommendations made Recognise role of democratically elected supplier representatives - - - Body Level One Body Level Two Body Level Three Body Level Four Body Level Five - 28 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Other suggestions included in written submissions Need clarity between Competition and Consumer Protection Commission Office should have strong enforcement powers Levy fines on buyers in breach of the legislation, outside of the statutory legal framework/courts system Office should be a spokesperson for the agri-food sector in communicating what is fair and sustainable trade Office should proactively promoting good conduct, fair trading and fair pricing and identify emerging risks Should include general supervision of the supply chain without necessity of opening infringement proceedings Body Level One Body Level Two Body Level Three Body Level Four Body Level Five There should be a Meat/red meat regulator 29 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Other suggestions included in written submissions contd. Market transparency Report market transparency on the different stages in the supply chain Aggregated vs Specific - Quarterly reporting Seek specific information from buyers Investigate into the entire breadth of the supply chain Ensure uniformity and consistency of certain practices in the sector Reference to role regarding competition law considerations including risk of cartels and market share 30 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q 4.1Practical implications Minimise administrative burden and costs Retain right to make contract changes Consideration to parties in the middle of the supply chain - buyer and supplier Difficulties in 30 days Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 31 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Complexity of agri-food supply chain, multiple actors and channels The level of burden imposed on operators regarding data collection; The commercial sensitivities of price data and margins and the right of operators to protect themselves Capacity and Capability to collect data Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 32 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Q.4.2 Name of new Office An Ombudsman is someone who deals with complaints from members of the public about services they have engaged with. They are not regulators. Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 33 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Next Steps Draft Primary legislation for new Office including incorporating the UTP EA Comparison with other bodies Legal issues Oireachtas pre-legislative scrutiny Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 34 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine

Finally reminder UTPs can be enforced from - 1 July 2021 for new agreements - 28 April 2022 existing agreements - Oral or written contracts - Contact: UTP@agriculture.gov.ie Body Level One Body Level Two Body Level Three Body Level Four Body Level Five 35 An Roinn Talmha ochta, Bia agus Mara | Department of Agriculture, Food and the Marine